Packaging Corporation of America Reports First Quarter 2021 Results

Packaging Corporation of America (NYSE: PKG) today reported first quarter 2021 net income of $167 million, or $1.75 per share, and net income of $169 million, or $1.77 per share, excluding special items. First quarter net sales were $1.8 billion in 2021 and $1.7 billion in 2020.

Reported earnings in the first quarter of 2021 include special items for closure costs related to certain corrugated products facilities and specific costs related to discontinuing paper operations associated with the previously announced conversion of the No. 3 paper machine at our Jackson, Alabama mill to linerboard.

Excluding special items, the $.27 per share increase in first quarter 2021 earnings compared to the first quarter of 2020 was driven primarily by higher volume $.45 and prices and mix $.31 in our Packaging segment and lower annual outage expenses $.12. These items were partially offset by lower volume ($.28) and prices and mix ($.03) in our Paper segment, higher operating costs ($.15), higher freight and logistics expenses ($.12), higher converting costs ($.02) and other expenses ($.01).

Financial information by segment is summarized below and in the schedules with this release.

In the Packaging segment, total corrugated products shipments with one less workday were up 6.6%, and shipments per day were up 8.3% over last year’s first quarter. Containerboard production was 1,195,000 tons, and containerboard inventory was up 14,000 tons from the fourth quarter of 2020 and up 41,000 tons compared to the first quarter of 2020. In the Paper segment, sales volume was up 5,000 tons from the fourth quarter of 2020 and down 48,000 tons compared to the first quarter of 2020.

Commenting on reported results, Mark W. Kowlzan, Chairman and CEO, said, “Packaging segment demand remained very strong throughout the first quarter as we set a new all-time quarterly record for containerboard volume and matched our all-time quarterly total box shipments record. The No. 3 machine at our Jackson, Alabama mill produced linerboard for the entire quarter, and the announced plans for permanently converting the machine from uncoated freesheet to linerboard are well underway. We were able to build some containerboard inventory ahead of our busiest planned outage quarter; however, we ended the quarter at a record low weeks-of-inventory supply for this time of year. The containerboard and corrugated products price increases we announced late in the fourth quarter of 2020 were implemented as planned, and in March we began the implementation of the price increases we announced earlier in the first quarter. In our Paper segment, volume and prices were lower compared to last year’s first quarter as expected, although late in the quarter we did begin to see the benefit of our announced paper price increases compared to the fourth quarter of 2020. Our mills and box plants did an outstanding job of meeting our customers’ needs by managing through the outages, raw material availability issues, and logistics challenges brought on by the winter storms and other weather-related events. However, we experienced higher inflation than we expected in most of our manufacturing and converting costs and significantly higher freight and logistics expenses. Overall, we were able to deliver solid results to start the new year.”

“Looking ahead as we move from the first and into the second quarter,” Mr. Kowlzan added, “in our Packaging segment we expect demand to remain strong, and we will continue implementing our previously announced price increases. We also expect export prices to move higher. In our Paper segment, we expect volumes to be fairly flat with higher average prices and mix as we continue the roll-out of our recently announced paper price increases. The second quarter will be our busiest of the year for planned annual outages in our Packaging segment with work scheduled at four of our mills. Outage expenses are estimated to be approximately ($.20) per share higher compared to the first quarter. We also anticipate continued inflation with freight and logistics expenses as well as most of our operating and converting costs. However, energy costs should improve as we move into seasonally milder weather.”

We present various non-GAAP financial measures in this press release, including diluted EPS excluding special items, segment income excluding special items and EBITDA excluding special items. We provide information regarding our use of non-GAAP financial measures and reconciliations of historical non-GAAP financial measures presented in this press release to the most comparable measure reported in accordance with GAAP in the schedules to this press release.

PCA is the third largest producer of containerboard products and a leading producer of uncoated freesheet paper in North America. PCA operates eight mills and 90 corrugated products plants and related facilities.

Some of the statements in this press release are forward-looking statements. Forward-looking statements include statements about our future earnings and financial condition, the impact of the COVID-19 pandemic on our business, expected benefits from acquisitions and restructuring activities, our industry and our business strategy. Statements that contain words such as “will”, “should”, “anticipate”, “believe”, “expect”, “intend”, “estimate”, “hope” or similar expressions, are forward-looking statements. These forward-looking statements are based on the current expectations of PCA. Because forward-looking statements involve inherent risks and uncertainties, the plans, actions and actual results of PCA could differ materially. Among the factors that could cause plans, actions and results to differ materially from PCA’s current expectations include the following: the impact of the COVID-19 pandemic on the health of our employees and on the employees of our suppliers and customers, on our ability to operate our business, and on economic conditions affecting our business and demand for our products; the impact of general economic conditions; conditions in the paper and packaging industries, including competition, product demand and product pricing; fluctuations in wood fiber and recycled fiber costs; fluctuations in purchased energy costs; the possibility of unplanned outages or interruptions at our principal facilities; and legislative or regulatory requirements, particularly concerning environmental matters, as well as those identified under Item 1A. Risk Factors in PCA’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission and available at the SEC’s website at “www.sec.gov”.

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